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RRSP Loans

RRSP Loans

The RRSP loan is an unsecured financing tool that allows your customers to borrow to contribute to their RRSPs and to benefit from tax deductions.

Why your customers should contribute to an RRSP?

This type of account allows deferring paying tax on the invested amount until retirement. Income and realized gains on RRSP investments will grow tax-free until withdrawal.

Since the tax rate to your clients at retirement will be necessarily lower than that during their working years, they will enjoy greater flexibility to maintain their lifestyle.

RRSP financing

In discussing the benefits of RRSP financing with your customers, do not forget to mention that this strategy allows them to:

  • maximize their annual dues
  • recover their RRSP unused contributions from previous years
  • contribute to their RRSP even if they do not currently have the cash flow
  • achieve their retirement goals.

Features

  1. Simplified or underwriting applications*
  2. Minimum amount of $1,000
  3. No maximum amount
  4. Single disbursement
  5. Fixed or variable rate
  6. Term between 3 to 60 months
  7. First payment can be deferred for 3 or 6 months
  8. Opportunity to defer a payment to the end of the term
  9. Payment frequency: weekly, every two weeks or monthly
  10. No application fees
  11. No penalty charges for partial or full repayment of the loan before term

Admissibility

  1. Available for new or existing clients
  2. Single or joint applicants

Advantages

  1. Easy access to funds to buy an RRSP while enjoying a competitive interest rate
  2. Opportunity to contribute more to an RRSP and take advantage of larger tax deductions
  3. Ability to repay the loan with the help of tax refund
  4. Flexible repayment formulas tailored to the client

How it works

  1. Life and disability insurance available
  2. Annual statement produced on December 31st
  3. Electronic funds transfer (EFT) from client’s personal bank account
  4. To calculate the payment on a variable loan, one month per year of term is deducted to avoid a balance at maturity, should there be an increase in interest rates during the term. For example, for a loan of 24 months, two months will be deducted in calculating the payments, which will be calculated on a 22 month term.

 

RRSP Type 1*

Using the RRSP loan as a "complement" of annual RRSP contribution

RRSP Type 2

Using the RRSP loan as an "adjustment" for a retirement planning

Proof of income Not required Required
Proof of assets Not required Required on demand
Balance sheet Not required Required
Minimum amount $1,000
Maximum amount The total RRSP loan amount is under the maximum RRSP contribution limit for the current year, as determined by CRA annually. None
Term 3 to 24 months 3 to 60 months
Rate Fixed or variable
Repayments according to the chosen rate

Fixed rate

  • Fixed payments: Principal and interests combined

Variable rate

  • Variable payments: Principal plus interests (in two separate payments)
  • Equal payments: Principal and interest combined
Payment frequency Weekly, every two weeks or monthly
Future funding option
  • Available only during the RRSP Campaign
  • Available only for variable rate loan
  • Offers the opportunity to apply for a loan today and pay towards the end of the RRSP campaign. This allows the clients to reduce the period between the loan disbursement and the receipt of their tax refund
  • The Disbursement at a future date option is NOT available for transfers and refinances
Deferral payments option
  • First payment can be deferred for 3 or 6 months. Accrued interest will be added to the balance of the loan.
  • The Deferred payment option is NOT available for transfers and refinances.
According to the agreement the Bank has with your firm, this product might not be available.